negotiating win/win severance packages

Negotiating Win/Win Severance Packages

CXOs and other high-level executives are likely to transition to other companies over the next few years – who’s choosing is the only real variable.  Many executives do not consider employment exit strategies when accepting a new position.  A merger, reduction in force, or asset purchase, among other reasons, thrust the issue upon the executive.  Negotiating win/win severance packages are more than maximizing a cash payment.  The short list of considerations below will assist with the separation.

What are your goals?

At the outset, set out in writing your goals.  For example, do you plan on remaining in the same industry?  The same geographical area?  How you separate from a regional employer, and how that is communicated, may impact you more if you plan to stay local.  Further, if your industry allows you to move to a supplier, reseller, marketer, or some other group within your former employer’s industry, consider restraints on your future activity (e.g., noncompete agreements).

What can you provide your former employer on the way out the door?

While difficult for many to fathom after a termination, yes, this is the second thing to consider, and it is important.  As Eddie Temple summed it up in Layer Cake, “The art of good business is being a good middleman. Putting people together.”  As a departing executive, you can continue to provide value to the company – value that may equate to consideration returning to you.  For example, agreeing to provide transition assistance (training your replacement; providing personal introductions to key vendors) in exchange for maintaining a company phone number/voicemail/email during your severance period may prove valuable. The appearance of continued employment during the severance period may be more attractive to new employers.

Keeping in mind that many employers want a clean break, offering to assist the company during the severance may develop goodwill to use during the negotiations, may provide helpful evidence if a lawsuit should arise, and provide an employee “throw aways” during any negotiation, even if not accepted.

Do your detective work

Prior to entering substantive negotiations, contact former employees who were severed out.  Confidentiality agreements may prohibit them from speaking about specific agreement terms, but the negotiation process may be open for discussion.  Who did the employee work with on the separation?  Did that person actually have authority to reach an agreement, or did it get sent up the chain?  Were any issues more important to the employer (e.g., releases, confirmation of noncompetition obligations)?  The initial leg work will provide a better view of the field of play.

Determine what is owed, and by whom.

Evaluate what you are owed, and when.  Salary, commissions, bonuses, stock options, deferred compensation benefits, expense reimbursement and any other compensation or reimbursement must be part of the discussion.  Also consider what you may owe the company.  Are you subject to relocation or education claw backs, for example?  The starting positions of you and the company will frame the negotiation.

Agreement terms

When discussing a separation agreement, consider the following terms.  For example, how will your separation be announced?  Many higher-level executives prefer a press release and website posting espousing the amicable separation, and good wishes for all.  Other executives may consider a simple company-wide announcement.  Along the same lines, you may consider whether a termination, resignation, or retirement announcement is preferable.  Keep in mind, how you separate may affect your right to unemployment.

While career changes are stressful events, proper planning and investigation may prove fruitful.  These are just some of the considerations in negotiating win/win severance packages, and you should, of course, ensure you obtain complete and accurate information regarding your rights.

For more information on negotiating win/win severance packages, contact Gregory M. Clift at 214.239.2777 or clift@RoggeDunnGroup.com.

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